Essent Group Ltd.

Good morning. My name is Julianne and I will be your conference operator today. At this time, I would like to welcome everyone to Essent Group's limited fourth quarter and full year 2021 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. I would now like to turn the call over to Phil Stefano, Vice President of Investor Relations, you may now begin your conference.

Thank you, Julianne. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and Larry McAuley, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guarantee. Our press release, which contains Essent's financial results for the fourth quarter of and full year 2021 was issued earlier today and is available on our website at SMgroup.com. Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections, and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. For discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release, the risk factors included in our Form 10-K filed with the SEC on February 26, 2021, and any other reports and registration statements filed with the SEC, which are also available on our website. Now, let me turn the call over to Mark.

Thanks, Phil, and good morning, everyone. Earlier today, we released our fourth quarter and full year 2021 financial results. which reflect the strength of our buy, manage, and distribute operating model. Our focus remains on optimizing our unit of economics and generating high quality earnings and strong returns while continuing to fortify our balance sheet, reduce through the cycle earnings volatility, and take a measured approach to capital management. Our outlook for our business remains positive as several trends continue to support housing's resiliency. Demand outweighing supply should continue to support home price appreciation albeit at a more moderate pace, while low unemployment with rising income should continue to benefit credit. In addition, purchase demand remains elevated as a result of demographic trends, which is positive for our franchise since we are levered to first-time homebuyers. And now for our results. For the fourth quarter, we reported net income of $181 million as compared to $124 million a year ago. On a diluted per share basis, we earned $1.64 for the fourth quarter compared to $1.10 a year ago. For the full year, we earned $682 million, or $6.11 per diluted share, while our return on average equity was 17%. At December 31st, our insurance and force was $207 billion, a 4% increase compared to $199 billion at the end of 2020. The credit quality of our insurance and force remains strong, with an average weighted FICO of 745 and an average LTV of 92%. Following our November ILN transaction, we have reinsurance coverage on 90% of the portfolio as of December 31st. During the quarter, we successfully rolled out the next generation of our risk-based pricing engine, S&Edge. We believe Edge has a competitive advantage given the number of data points that we analyze when pricing credit risks through machine learning and cloud-based technology. Given these advantages, our team will continue to strive for broader adoption of edge technology away from static rate cards. We believe this continued evolution of pricing is mutually beneficial, delivering our best price to borrowers while optimizing our unit economics. A Bermuda-based reinsurance company, S&RE, had a strong year in writing high-quality and profitable GSE risk share business. and continuing to provide fee-based MGA services to our reinsurer clients. S&RE ended the year with $1.8 billion of risk and force compared to $1.4 billion at the end of 2020. We believe there is a continued opportunity for S&RE to capitalize on the growth in the GSE risk share market. Our S&Ventures unit was formed to make investments which are intended to give us access to information to improve our core business, enhance financial returns, and increase our book value per share. We closely monitor the ongoing intersection of the housing finance, real estate, insurance, and technology sectors and believe there will continue to be opportunities to take advantage of this changing landscape by leveraging our mortgage technology, credit, and operational expertise. As of December 31st, we are in a position of strength with $4.2 billion in gap equity, access to $2.7 billion in excess of loss reinsurance, and over $1 billion of available liquidity. With a full year 2021 operating margin of 80% and operating cash flow of $709 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective. As evidence of this, Essent Guaranty remains the highest rated monoline in our industry at single A by AM Best and A3 and triple B plus by Moody's and S&P respectively. The strength of our model also enables a measured approach to capital distribution. In 2021, we returned over one-third of our earnings to shareholders in the form of dividends and share repurchases. We remain committed to managing capital for the long term, exhibiting patience in our capital planning to maintain strength in our balance sheet. As of December 31st, our book value per share was $38.73. Since going public in 2013, our annualized growth rate in book value per share is 21%, and we continue to believe that success in our business is measured by growth in book value per share. Finally, given our financial performance during the fourth quarter, I am pleased to announce that our board has approved a one cent per share increase in our dividend to 20 cents. This is the fourth consecutive quarterly increase and represents a 25% increase from a year ago. which we believe is a meaningful demonstration of stability in our earnings and cash flow. Now, let me turn the call over to Larry.